Interview with Jeff Atwater, former Florida Senate President and Florida’s Chief Financial Officer-Elect, on why he led the charge for a nonbinding referendum on Florida’s support for an amendment to the U.S. Constitution to require a balanced federal budget without raising taxes.
As the lame duck Congress prepares to take up the issue of what to do about the expiring Bush tax cuts, liberal pundits are busy proving to the American people that no journalism school in America provides economics education. A few points to make with your liberal friends as you argue economics the next time you join them for a non-fat soy latte made from fair trade ingredients:
Extending the Bush Tax Cuts Won’t “Cost” Anything — Liberals can’t stop carping about the $700 billion “cost” of extending tax cuts for Americans making over $250,000 a year. This is preposterous. The absence of tax increases isn’t a cost to the federal government. If it was, then every dollar kept in private hands instead of transferred to Washington would be a cost. Private businesses don’t account for imaginary revenues as costs, and there’s no reason for government to either. This is just an excuse for not bringing expenditures into line with “revenues” (i.e. money confiscated from you).
A Shortage of Tax Revenue Isn’t the Root of America’s Fiscal Problems — The class warfare rhetoric at the heart of the tax fight is a red herring for the real issue at hand. Virtually all taxes kill economic activity. Of course, some tax revenue will always be necessary to finance the basic functions of government, but beyond that baseline taxes are actively destructive. Thus the real choice when it comes to upper-level earners’ tax rates isn’t whether they should be soaked or not. It’s whether you think the federal government is doing too little (in which case taxes need to increase and more private economic activity should be killed) or too much (in which case spending needs to decrease).
Income Inequality is a Meaningless Metric — Proponents of aggressively progressive taxation who are prone to ideological rather than practical justifications of their beliefs have increasingly been leaning on an argument that America suffers from growing income inequality. This is specious for two reasons. First, it presumes that there is an ideal distribution of wealth that exists free of merit. The more free an economy is, however, the more income is a function of how much value one creates in the marketplace. So do we want a nation of C students (socialized mediocrity) or a nation where the highest achievers get A’s and the lowest ones are held back a year (with generous welfare benefits, we should add)? Also, these numbers are absolutely useless from a statistical perspective. Samples of income tiers measure groups, not individuals. So when we say that the rich are richer and the poor are poorer than 20 years ago, we ignore the dynamism of the American economy — and the resulting fact that many individuals who were on the lower rungs of the economic ladder two decades ago have moved up, and many at the top have moved down. This interpretation also ignores the fact that the gap is less important than the actual numbers. If you have $200 and I have $100, are incomes are closer to parity than if you have $1 billion and I have $1 million. But in the latter scenario, we’re both better off individually and society (if it consists of just you and I) is better off as a whole. Now imagine extrapolating that analysis to an entire nation
Virtually Every Number You See About Poverty in America is a Lie — For one simple reason: government calculations of poverty do NOT factor in benefits conveyed by government. To prove the point using an unrealistic example, a family of four making $40,000 a year but receiving $60,000 in government assistance, would still be captured in government statistics as making $40,000 a year, even though their actual income would be $100,000.
Unemployment Benefits are NOT a Form of Economic Stimulus — From Nancy Pelosi to Nicolas Kristof, every empty head on the left seems to have the idea that unemployment benefits are a form of economic stimulus rattling around inside it. The idea is that because the poor have the greatest need for liquidity (and will thus spend the cash the quickest) unemployment greases the wheels of commerce. This is a basic Keynesian fallacy: thinking of the economy only in terms of consumption. But if this is true, why wouldn’t the road to recovery be paved with every American emptying out their bank account for a trip to Nordstrom’s? Maximum economic efficiency is achieved by putting money to the use that provides the greatest benefit relative to the cost to the individual. In some cases, this will be consumption. But in others it will be investment or savings. Unemployment benefits can be justified on humanitarian grounds, but not on mechanical economic ones (indeed, excess unemployment benefits drive up unemployment — not a surprise if you remember that you always get more of what you subsidize). Paychecks generally provide the basis for a sounder economy than food stamps.
A survey of Democratic 2010 campaign operatives shows 64% of those polled said the Tea Party was a source of enthusiasm for the GOP, not division. Perhaps now the politicians and pundits trying to blame tea partiers for everything from falling short of a GOP Senate majority to racism will now find a new hobby.
The limited government movement continues to pick up steam as the newly empowered congressional Republicans aim to rein in federal spending. But while Tea Party members may favor GOP candidates, don’t be surprised if failing to make progress on spending reform leads to more contested GOP primaries in 2012.
As CFIF recently noted, the Democrats in Congress are committed to passing more controversial legislation before their chokehold on the legislative process eases in January. Reporting from the San Antonio Express-News confirms that members of the Congressional Hispanic Caucus are personally lobbying President Barack Obama to put the weight of his slight frame behind a vote on the DREAM Act during the lame duck session.
As noted in the Express-News article, there are 800,000 reasons to do so:
The DREAM Act, or Development, Relief and Education for Alien Minors Act, would require the affected youths to enter the armed forces or attend college for two years, clear a background check and have no criminal records to be eligible for citizenship.
Roughly 800,000 teens and young adults would be eligible, according to immigration rights groups.
With one of those immigration rights groups estimating an annual addition of 65,000 potential beneficiaries under the DREAM Act, the only thing standing in the way of a multi-generational Latino dependency on the Democratic Party is a GOP-led filibuster in the Senate.
Every so often, someone captures the proverbial lightning in a bottle. Today, it was Wall Street Journal columnist Bret Stephens and his commentary entitled “Obama’s Air Guitar.” Stephens’s weekly commentaries are always a must-read, but today’s perfectly portrays the growing sense among the American electorate, more sober observers and now world leaders that Barack Obama is simply in over his head:
His administration has now been chastised or belittled by everyone from the Supreme Leader of Iran to the finance minister of Germany to the president of France to the dictator of Syria. What does it mean for global order when the world figures out that the U.S. president is someone who’s willing to take no for an answer? The answer is that the United States becomes Europe. Except on a handful of topics, like trade and foreign aid, the foreign policy of the European Union, and that of most of its constituent states, amounts to a kind of diplomatic air guitar: furious motion, considerable imagination, but neither sound nor effect. When a European leader issues a stern demarche toward, say, Burma or Russia, nobody notices. And nobody cares.”
Since he first began flirting with a White House campaign, Obama has long created the impression that he considers the presidency a video game, or a pickup game of hoops with himself at point guard taking a three-pointer on every possession. But now we have a description that perhaps captures the Age of Obama better than any other to date: Obama as air guitarist.
Regular readers know that Paul Krugman, Tom Friedman, and Joe Klein regularly jockey for the status of political pundit I most despise. Well, Dr. Krugman pulled into the lead with his stunning endorsement of “death panels” as the royal road to America’s fiscal health on yesterday’s edition of “This Week with Christiane Amanpour”:
Join CFIF Corporate Counsel and Senior Vice President Renee Giachino today from 4:00 p.m. CST to 6:00 p.m. CST (that’s 5:00 p.m. to 7:00 p.m. EST) on Northwest Florida’s 1330 AM WEBY, as she hosts her show “Your Turn.” Today’s star guest lineup includes:
4:00 pm (CST) Virginia Scharff, author of “The Women Jefferson Loved”
4:30 pm (CST) Susan Ferrechio, Chief Congressional Correspondent for The Washington Examiner, New Congress
5:00 pm (CST) Sheriff Larry Dever, Immigration
5:30 pm (CST) Timothy Lee, Center for Individual Freedom, Deficit/Economy/Judges
Please share your comments, thoughts and questions at (850) 623-1330, or listen via the Internet by clicking here. You won’t want to miss this!
In a surprise announcement on the Senate floor this afternoon, Minority Leader Mitch McConnell announced that he will be supporting a moratorium on earmarks in the 112th Congress. McConnell, who for the last couple of weeks has defended the practice of earmarks, stated:
…I have thought about these things long and hard over the past few weeks. I’ve talked with my members. I’ve listened to them. Above all, I have listened to my constituents. And what I’ve concluded is that on the issue of congressional earmarks, as the leader of my party in the Senate, I have to lead first by example. Nearly every day that the Senate’s been in session for the past two years, I have come down to this spot and said that Democrats are ignoring the wishes of the American people. When it comes to earmarks, I won’t be guilty of the same thing.
Make no mistake. I know the good that has come from the projects I have helped support throughout my state. I don’t apologize for them. But there is simply no doubt that the abuse of this practice has caused Americans to view it as a symbol of the waste and the out-of-control spending that every Republican in Washington is determined to fight. And unless people like me show the American people that we’re willing to follow through on small or even symbolic things, we risk losing them on our broader efforts to cut spending and rein in government.
That’s why today I am announcing that I will join the Republican Leadership in the House in support of a moratorium on earmarks in the 112th Congress. …
There may be no politician more adept at turning Tea Party popularity into actionable results than Senator Jim DeMint (R-SC). Yesterday, the conservative icon took the unusual step of publicly withdrawing his support of his party’s fundraising head, Republican National Committee Chairman Michael Steele. There are good reasons to do so, but by publicizing his displeasure DeMint is serving notice on the rest of the GOP that he is ready to push for a more robust conservative presence throughout the party’s apparatus.
With his Senate Conservatives Fund DeMint went head-to-head and beat several GOP primary candidates supported by the National Republican Senatorial Committee, led by fellow Senator John Cornyn (R-TX). With freshman senators like Florida’s Marco Rubio, Kentucky’s Rand Paul, and Utah’s Mike Lee owing much to DeMint’s patronage, expect to see the junior senator from South Carolina take on a much bigger role in deciding his party’s next presidential nominee. If DeMint manages to replace Steele with a RNC Chairman of his choosing, he will be better positioned than any conservative in the party to make a serious run for the nomination.
Canaries and markets are sensitive creatures. Take a canary down a coal mine and the poor bird starts dying as soon as the toxic levels of coal dust start rising. Wait too long, and coal miners will be following their yellow feathered friend down the River Styx. The key is to monitor the canary carefully for signals that it’s time to stop digging before it’s too late.
The market is a similar beast, even though the data miners of economic trends at places like Princeton and the Federal Reserve Board choose to think otherwise.
Practitioners of microeconomics presume they have “perfect information” by which they mean knowing all the relevant data before making a decision. Thusly armed they sally forth to wage war on behalf of whatever economic model (or political interest) they claim provides the greatest good.
Such is the case with Federal Reserve Board Chairman Ben Bernanke, the Princeton economist responsible for authorizing the printing of hundreds of billions of dollars to “quantitatively ease” the lack of money flowing in the marketplace, and spur a “healthy” bit of inflation. Bernanke is doing this because he assumes he has all the relevant data to support such a move.
A new price survey of a Wal-Mart grocery basket says otherwise. The retail giant is raising prices, a market signal that inflation is already underway without government interference. Like any market leader, Wal-Mart’s actions will be quickly emulated by others in their sector, with down market effects reverberating across the economy.
The market is already sensing the need for inflation and is acting accordingly. A massive injection of “Fed Stimulus” to achieve the same goal will result in accelerating inflation beyond what’s considered healthy, devaluing the dollar and making it harder for middle class families to buy necessities. That kills an economy. If Bernanke continues to ignore the ability of the market to adjust itself, it will soon be his career lying lifeless in the shaft.
It is if it means exporting a set of beliefs into an area ill-suited to implement them. So says a startling (but by no means new) assertion about the real world effects of foreign aid. In an article that fleshes out the unease some of us encounter about the efficacy of giving good money to bad people, Margaret Wente of The Globe and Mail argues that aid to Africa is being used to prolong suffering rather than end it.
Ethiopia provides one sobering example.
The starving children of Ethiopia were not the victims of drought, as most people believed at the time. They were the victims of politics. The government of the time was using famine as an instrument of war, and the rebels were more interested in defeating the government than in feeding famine victims. As William Easterly, a leading aid skeptic, puts it, “It’s not the rains, it’s the rulers.” Political famines attract the food aid industry, with the consequence that governments or rebel groups are able to feed their own armies and divert resources to buy more weapons. Humanitarian aid in conflict zones is always problematic. It helps the bad guys as well as the innocent.
Today, the children of Ethiopia are still starving, and the brutal regime that keeps them hungry continues to get funding from well-intentioned people trying to fix the wrong problem. It’s not the rains, it’s the rulers. Unless the rule of law protects the property and dignity of individuals, all that the philanthropy in the world will do is empower the strong at the expense of the weak.
At least outgoing House Speaker Nancy Pelosi (D-CA) can claim credit for creating one job during her tenure. According to The Hill, Pelosi – the frontrunner to become Minority Leader when the defeated Democrats give up power next Congress – has a novel idea how to decide which of two people gets one available job: create a new position. (Title and portfolio TBD)
How perfect. Rather than let Reps. Steny Hoyer (D-MD) and Jim Clyburn (D-SC) compete for the position of Minority Whip, Pelosi is proposing to create a federal job that spends more taxpayer money. (Unless, unlike all other congressional leadership positions, the new post comes without staff, office, and an expense account; a situation that would hardly appeal to anyone gunning for a job with real power.)
Even in the face of a 60 seat rebuke that cost her the Speakership, San Francisco Nancy is still following the same liberal formula of growing the federal government. If this is the kind of in-the-box, hidebound thinking House Democrats want to pursue over the next two years, Republicans should get ready to win even more seats in 2012.
Traditionally, presidents facing opposition at home go abroad to find policy and political success. Basically, if you can’t beat them, play with someone else. It’s an especially useful move in the latter part of a president’s second term, when lame duck status settles in and speculation about a successor mounts.
Perhaps we’re seeing that now with one-term President Barack Obama. One thing is missing, however, from the script: a foreign policy success.
All this may make him more likely to be defeated in his reelection campaign, but it is a terrible projection of powerlessness to the rest of the world.
On today’s Foundry blog at the Heritage Foundation there is a crisp analysis of the cost-cutting decisions being weighed by states threatened with billions in rising health care costs under ObamaCare. With a massive, mandatory expansion of Medicaid rolls beginning in 2014, state budget writers are seriously considering dropping out of the Medicaid program in order to avoid bankrupting their treasuries.
Granted, it’s outrageous that the liberal elites running Washington, D.C. are forcing state governments to spend more of their taxpayers’ money on health care. After all, the States didn’t get to vote on ObamaCare. But too often in this debate there’s a simple – though difficult – solution that up until now hasn’t been mentioned.
Opt out. The only way the federal government can dictate spending and policy decisions to the states is if the states agree to the terms. Those terms are buried in the fine print of federal programs that condition receipt of federal money on compliance with federal policies. Like dramatically increasing Medicaid rolls.
Though opting out of Medicaid will be difficult because it also means losing the matching funds that come with it, the renewed control over a state’s budget should give state legislators much more room to maneuver during this era of dwindling tax receipts. Governments, like individuals, need options. Opting out of Medicaid is an important first step to regaining state sovereignty.
The overriding problem with the commission’s plan is that it accepts the 2010 fiscal year as its spending base, thereby locking in the alarming spending increases of the Obama-Pelosi-Reid regime. That includes the failed “stimulus” that attempted to spend our way to prosperity, the bailouts, the pet projects and everything else they’ve heaped into our budget. Since 2008, federal spending has surged from approximately $25,000 per household to $30,000 per household, and jumped during that two-year span from its historical average of 20% of gross domestic product (GDP) to approximately 25% of GDP. Richard Rahn points out that, “Federal government spending and revenues in 1968 as a percentage of gross domestic product (GDP) were almost identical to the levels in 2008.”
Unfortunately, it’s actually even worse than that. The commission also leaves in place ObamaCare, which is already driving up healthcare costs and adding to the deficit (despite promises that it would have the opposite effect). As James Capretta from National Review Online observes, we shouldn’t be surprised given the commission’s composition:
None of this is all that surprising, given how the commission was formulated. It’s not really a bipartisan commission at all; it’s an Obama commission. It was created by the president and stacked with Democratic appointees. Two-thirds of the 18 members were picked by the president or Democratic congressional leaders. Only six were appointed by Rep. John Boehner and Sen. Mitch McConnell. The president says the public doesn’t want to “re-litigate” the health care war. He’s wrong. As last Tuesday’s exit polls make clear, a strong plurality wants exactly that. The American people know that the ill-advised law was railroaded through Congress and is a colossal mistake. The fundamental problem here is that it is not possible build a bipartisan budget framework on a foundation that includes a partisan health-care plan with sweeping implications for future spending levels.
Americans cannot be asked to accept the commission’s findings when they take as a given current spending levels and an ObamaCare atrocity that must be replaced.
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